I propose to make a statement on the European Council which I attended with Deputy Peter Barry, Minister for Foreign Affairs, at Fontainebleau on 25 and 26 June 1984.
The meeting discussed East-West relations; the recent Western Economic Summit in London; budgetary problems in the Community including the British problem and the provision of new own resources; the progress made in launching new Community policies; social policy; problems related to the dismantlement of positive MCAs in Germany; ways of making the Community more closely relevant to the European citizen, including environmental and health issues; and questions relating to the functioning of the institutions in the perspective of progress towards European Union.
The conclusion of most immediate significance was the agreement on the issues which had remained outstanding from the programme agreed at Stuttgart last summer. The most intractable of these was, of course, the problem arising from British dissatisfaction as to the balance between member states arising from the financing and disbursement of the Community budget. As Deputies are aware, this problem has been a distraction affecting the development and the vitality of the Community for many years past. While temporary settlements were patched up at various times, the problem returned again and again to overshadow everything else. In recent times, as Community expenditure was set to outrun the own resources available within the 1 per cent VAT limit, and with the maintenance by the UK of a linkage between satisfaction on its problem and agreement to raise the VAT limit, the prospect of bankruptcy for the Community was becoming very real.
At two successive meetings of the European Council, in Athens last December and in Brussels last March, it had not been possible to reach agreement on the issue. As a result, the conditional agreement of last March to raise the VAT limit remained blocked, at a time when it was estimated that the resources available to the Community this year would fall far short of the amount required to meet the payments to be made, by an amount at present estimated by the Commission at 2,300 million European Currency Units. In the absence of agreement, the Community would have run out of money by about October next, with the most serious consequences for Community policies, many of them of vital interest to Ireland. The task of the Irish Presidency in these conditions would have been daunting.
The agreement reached at Fontainebleau was a noteworthy success for the French Presidency, and a tribute to the sense of balance of the other member states. It has opened the way to an increase in own resources, thus providing the means for the enlargement and relaunch of the Community. By ending what the British Prime Minister herself described as a wearying and debilitating wrangle, it has created an atmosphere and spirit in which a relaunch becomes possible.
Under the agreed arrangement, the United Kingdom will be paid a lump sum of 1,000 MECUs for 1984 and for 1985 and some years thereafter, so long as the Community VAT limit is maintained at 1.4 per cent, will be paid 66 per cent of the gap between its share of VAT payments and its share of Community expenditure. This formula is part of the decision to increase the VAT ceiling of the Community to 1.4 per cent, which will come into effect on 1 January, 1986. The rate may be further increased to 1.6 per cent on 1 January, 1988 by unanimous decision of the Council and after agreement has been given in accordance with national procedures.
I am happy to say that the agreement reached does not strike at fundamental Community principles. It does not constitute juste retour. It does not incorporate features which would undermine the system of own resources. Indeed, in its definition of the basis for the correction it gives clear recognition to the fact that custom duties and agricultural levies are the property of the Community. I will not pretend that the agreement fully corresponds to Community financial orthodoxy but it is a pragmatic arrangement which has resolved a long-standing problem without doing violence to the foundations of the Community.
The decision on new own resources would not, in itself, meet the shortfall in resources foreseen in regard to the 1984 budget. It was therefore a matter of considerable importance for the Irish Presidency of the Council that on our proposal it was agreed and is recorded in the Presidency conclusions that, pending the ratification by national parliaments of the increase in own resources, steps will be taken at the next Budget Council meeting to cover the needs of the 1984 budget to ensure that the Community operates normally. The Irish Presidency will act along these lines.
The raising of the limit on own resources at Fontainebleau also paved the way for confirmation that the negotiations for the accession of Spain and Portugal should be completed by 30 September at the latest, as agreed in Brussels in March. I might comment here that this is a very tight deadline, having regard to the progress to date with the negotiations on some dossiers of major importance to both sides and the progress remaining to be made. The Irish Presidency is, of course, prepared to take all necessary steps to meet the timetable but will require the full co-operation of the Commission, of our partners in the Council and of the applicant countries, on whose part there has been some emphasis of late that pressure to meet deadlines should not prevent both sides working to obtain the best possible agreement, representing an equitable balance between the two sides. The European Council noted that between now and 30 September, the Community will have to make every effort to create the right conditions for the success of this enlargement — in the negotiations with Spain on fisheries which it is made clear must provide for conservation of fish stocks; in the reform of the common organisation of the wine market in such a way as to ensure that the quantities of wine produced in the Community are controlled; and by means of a fair balance between agricultural and industrial agreements.
The second major agreement reached in the Council enables VAT relief for German agriculture to be increased from 3 per cent to 5 per cent with effect from 1 July 1984 to 31 December 1988. This decision arises, in part, from difficulties which had been experienced in the dismantling of the monetary compensatory amounts, in so far as German farmers were concerned. The costs will be borne on the German national budget — and in the sense that they are a national aid they are contrary to the spirit of the CAP. However, in contrast to the 3 per cent VAT refund agreed at Brussels the arrangements are now limited to the period of just over four years, which is an important safeguard.
What I have said so far might perhaps give the impression that this meeting was completely taken up with discussion of the budgetary or agricultural problems of individual member states, as happened on recent occasions. In fact, most of the work on these matters was done in the back rooms. As a result, we were able, as envisaged by President Mitterand in planning the conduct of the meeting, to raise our eyes from these problems and to consider the larger issues: the Community's place in the world; how to make the Community a reality to its citizens in their daily lives and to promote its identity and its image both for its citizens and for the rest of the world; and how to step up progress towards European union. A number of concrete proposals to this end are summarised in the Presidency conclusions. Work will be pushed ahead on them during the Irish Presidency, following the establishment of an ad hoc committee, representative of the Heads of State or Government, to prepare and co-ordinate action on this front.
The Council also decided to set up an ad hoc committee on Institutional Affairs, consisting of personal representatives of the Heads of State and of Government, on the lines of the “Spaak Committee”, the function of which will be to make suggestions for the improvement of the operation of European co-operation in both the Community field and that of political or any other co-operation. It falls on me as President of the European Council from 1 July to take the necessary steps to implement that decision.
In a contribution to the work of the Council, on the first day, I drew attention to the menancing economic problems facing the Community. In the United States, total employment has increased in the ten years between 1973 and 1983 by more than 15 million. In the Community with a rough equivalence of population, employment fell in the same period by two million. I indicated our acceptance of the fact that, as had been suggested, there is need to improve flexibility in the labour market in Europe and to control excessive Government spending, especially where this imposes severe problems on taxpayers. But I added that we could not be happy with the failure to use the collective strength of the Communities and with their lack of joint action to improve economic growth. There is, in particular, the need for the Community to be ready to face the consequences of a possible halving of US growth rates next year, which, if we take no corrective European action, would eventually, if not in 1985, then in 1986, reduce the much lower growth rates so far achieved in Europe.
This must be a major theme in our Presidency. What is clear is that market forces, left to themselves, will not resolve the unemployment crisis. Additional measures may be needed, both to provide an economic stimulus and to alleviate unemployment, for example, as I suggested at the Council, by applying the Social Fund to the task of substituting work for unemployment, rather than just training people for work which in some cases may not be available.
As Deputies know the term of office of the present members of the European Commission expires at the end of this year. As the incoming President of the European Council, I was asked to consult with member states and to secure agreement on a new President of the Commission. I hope to do this over the weeks ahead. It may be recalled that there was agreement on the part of nine member states in the context of the Genscher-Colombo Solemn Declaration on European Union that before the President of the Commission is appointed, the Presidency in office would seek the opinion of the enlarged bureau of the Parliament.
Our discussion of world political problems focussed on the subject of East-West relations. President Mitterand gave us an account of his recent meetings with President Chernenko and other Soviet leaders in Moscow, during which he laid particular stress on the need for greater respect for individual rights in the Soviet Union, and instanced the situation of Mr. Andrei Sakharov as a case in point. The ten Heads of State and Government agreed that, in this period of uncertainty, when relations between the superpowers are more than usually tense, and important talks on the control and reduction of nuclear armaments are suspended, it is more than ever necessary to seek means to keep open all possible avenues of contact between East and West. The Ten will do all that is in their power to contribute to this end.
In the margins of the Council, I had a meeting with the British Prime Minister, Mrs. Thatcher, which was extremely useful and constructive. We discussed Anglo-Irish relations generally, following the publication of the Report of the New Ireland Forum, and we agreed to hold a bilateral meeting later in the year.
In London on 27 June, on my way back from the Council, I had meetings with Mr. Neil Kinnock, the Leader of the Labour Party in the UK; Dr. David Owen, Leader of the Social Democratic Party and two of his colleagues, Mrs. Shirley Williams and Mr. Robert McLennan; and with Mr. David Steel, Leader of the Liberal Party. I also availed of the opportunity of having very full and informative discussions on the situation in Central America with Mr. Monge, President of Costa Rica, who was in London at the same time. He was accompanied by his Minister for Foreign Affairs, Minister for Planning and Economic Policy and Minister for Communications. This meeting provided an opportunity for a valuable exchange of information and views which was helpful to our understanding of the situation in Central America, and to the preparations for the September meeting in Costa Rica between the Community and its applicant states, Spain and Portugal, on the one hand, and the five Central American Governments on the other.
I should add that I expressed at the conclusion of the European Council meeting — and would like to reiterate here — our warm appreciation of the work of the French Presidency. During his period as President of the European Council, President Mitterand went to great lengths to use his great personal ability in furthering the interests of the Community. He took office at a difficult time at the beginning of 1984 and has spared neither himself nor his Ministers in obtaining important and relevant decisions both in Community matters and in European political co-operation. He and his Ministers were exceptionally helpful to us earlier this year in relation to our special problem about the milk super-levy.
Many Community problems remain to be tackled, in particular, the difficult social and economic situation in the Community, the completion of negotiations in the new Lomé Convention, which are, however, far advanced, and enlargement to include Spain and Portugal. And we have to establish and lead towards a successful outcome of the working groups on problems relating to the creation of what has been called a Europe of the citizens and the high level group on institutional affairs.
In the Irish Presidency, we shall take inspiration from the effort and success of the French Presidency and will do our duty with enthusiasm and with diligence.
